The world financial market made simple to understand:Who leaves countries? Mobile people, young people. Which brings me to The Asia Times, and Spengler's take on the subprime fiasco:
Related items: here and here.
Germany's President Horst Koehler has denounced the world financial market as a "monster" using "highly complex financial instruments" to make "massive leveraged investments with minimal capital". Koehler, formerly head of the International Monetary Fund, seems perplexed about the causes of the present crisis, but I can explain them in a way any German can understand.
And he does. In essence, Germany does not have enough young people for its old people to lend money to. So its financial institutions went to where the young people are: America. As Spengler says:
There is nothing complicated about finance. It is based on old people lending to young people. Young people invest in homes and businesses; aging people save to acquire assets on which to retire. The new generation supports the old one, and retirement systems simply apportion rights to income between the generations. Never before in human history, though, has a new generation simply failed to appear.
Wednesday, May 21, 2008
Germany, demographics, and the financial crisis.
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